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Note 7 disaster's opportunity cost estimated at over W3tr

[THE INVESTORSamsung Electronics on Oct. 14 estimated the opportunity cost of its ongoing Galaxy Note 7 recall at about mid 3 trillion won (US$2.6 billion) in the coming months.

The announcement comes after the Korean tech giant earlier this week slashed its third-quarter earnings estimates to reflect the direct recall cost of about 4 trillion won. 




Samsung is recalling about 2.6 million units of the fire-prone Note phones, including 1.9 million in the US, 500,000 in Korea and 190,000 in China, by the end of this year. The company has stopped the sales and production of the phone, pledging to make all-out efforts to overhaul its product inspection process.

“The direct recall cost was reflected in the third-quarter earnings. But we expect further profit losses from the Note recall in the four quarter and the first quarter next year,” the company said in a statement.

The company said the opportunity cost would be 2 trillion won in the fourth quarter and 1 trillion won in the first quarter next year, adding that the figures were offered to help investors better understand the company’s business outlook.

The company said it will focus more resources on promoting its Galaxy S7 and S7 Edge smartphones to cover losses following the withdrawal of the bigger-screen Note phone from the market.

On Oct. 12, the company slashed its third-quarter operating profit estimates to 5.2 trillion won from the previous 7.8 trillion won. Revenue was also expected to be lowered to 147.72 trillion won from 149.72 trillion won.

By Lee Ji-yoon (jylee@heraldcorp.com)
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